The mainland's securities regulator will vet two applications for initial public offerings tomorrow, dashing investors' expectations that it would stem the supply of equities to bolster the market.

The benchmark Shanghai Composite Index dropped 11.71 points, or 0.56 per cent, to 2,074.42 yesterday amid mounting worries of a further liquidity drain, when trading reopened after a nine-day holiday break.

The China Securities Regulatory Commission (CSRC) said yesterday that it would review IPO applications by Chongqing Gas and Shenzhen Suntak Circuit Technology tomorrow.

Beijing suspended IPO approvals for firms seeking to list on the Shanghai Stock Exchange and the board for small- and medium-sized enterprises at the Shenzhen exchange from July 31.

The halt was aimed at shoring up the confidence of investors, who expected the regulator to prolong the hiatus. But yesterday's announcement threw a wet blanket on their expectations.

The CSRC resumed approvals for start-ups to list on the Nasdaq-style ChiNext market in Shenzhen at the end of last month after a two-month halt.

The benchmark went as high as 2,096.29 points after trading opened in the morning before falling 1.5 per cent to an intraday low of 2,063.09 points in the afternoon. The drop in the afternoon boded ill for the market outlook, analysts said.

The performance of mainland-listed firms is expected to have worsened in the quarter to September following a 6.6 per cent year-on-year decline in first-half earnings.

The suspension of IPOs was viewed as possibly Beijing's strongest measure to underpin the market and a sign that it would roll out more incentives to support the market. A rumour about its continuation drove the key indicator up 2.6 per cent on September 27.

The CSRC said 638 firms had filed IPO applications and they could raise several hundred billions of yuan from the market.

The mainland was the world's largest IPO market in the past two years, but the Shanghai index was at the same time among the worst-performing worldwide, losing 5.7 per cent this year.

Guotai Junan Securities analyst Bian Fengwei said it could fall to 2,050 points in the coming days due to a lack of confidence.

"Investors were a bit disappointed in the morning, as they were expecting some policies could be rolled out [by Beijing] to save the market," Francis Kwok, executive director at Bright Smart Securities & Commodities, said.

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